Mortgage fix for 2, 3 or 5yrs - please help!

Karen77

Hi forum,
My mortgage deal (currently 1.4%!) ends at the end of this month and I've been agonising over whether to fix for a 2, 3 or 5yr deal. The 2 year deal would see an increase in monthly payments of £279 on top of what I pay currently, the 3yr would be £253 more and the 5yr would be £242 more. 

I know no-one can predict the future interest rate changes, especially beyond the next 6months, but I'm in such a quandary as it is already a massive increase in monthly outgoings. If I pay the higher 2yr rate, I will be paying more over the 2yrs but if the interest rates come down, it may well make up for it over the subsequent 3yrs. If I stick with another 5yr deal, I won't benefit from interest rate decreases but the problem is, they may not come down (very much or at all).

If I end up paying more on a 5yr deal and they do come down, I'll kick myself. If I go for a 2 or 3yr deal and they don't come down, I'll kick myself. It's such a stressful decision.

Is anyone in a similar position? What would you do in the same circustances? In the absence of people to discuss it with, I'd really appreciate your views, thanks 🙏🏼

El_Torro

I'm going to be mortgaging a residential property soon. Based on what I know today my plan is to go with a 2 year fixed rate, with the hope that interest rates will drop in the next two years.

It's a gamble, as always. My biggest concern (there might be bigger concerns that are less apparent to me) is that if the incoming US administration starts a tariff war and this escalates globally then interest rates might start going up. I'm sticking with the 2 year fixed rate plan for now though.

Karen77

El_Torro said:

I'm going to be mortgaging a residential property soon. Based on what I know today my plan is to go with a 2 year fixed rate, with the hope that interest rates will drop in the next two years.

It's a gamble, as always. My biggest concern (there might be bigger concerns that are less apparent to me) is that if the incoming US administration starts a tariff war and this escalates globally then interest rates might start going up. I'm sticking with the 2 year fixed rate plan for now though.

That's exactly what I've been concerned about. What the US does next could massively affect our economy. It is such a gamble. Thanks for your comment 👍🏻

Hoenir

Why not take the 5 year rate and overpay by the difference between the 2 and 5 year. Interest rates aren't going to return to level of the era that has passed. With a 5 year fix you can at least budget and relax. Rather than worrying about every twist and turn. 

Mark_d

I am in a similar position.  My current mortgage rate is only marginally more than yours and I too am facing a a significant increase.

I believe mortgage interest rate will not change significantly over the next two years (just my opinion).  I'm tempted to go for a 2-year deal now.  Hopefully the decision will be clearer in 2 years time.  Going with 2-year deals means you have to pay the "booking fee" more frequently than with 5-year deals but I'd rather this than be stuck paying 4% for 5 years if the interest rate falls by 1%.

Newbie_John

Are there any "£999" fees as well? The 2 year one is 24x£40 = £960 more expensive over two years. Nobody knows if after that rates will be 1% or 10% 🤔

dougson

I was in a similar position 18 months ago and opted for the 5 year despite being fairly convinced rates were about to come back down. 

Fast forward 18 months and the market leading rate is only 0.05% better than the rate I got. As such my recommendation would be to take the peace of mind and get the 5 year.

My take on things is that following a slow Christmas for retail, low sales for long haul travel and lots of negative talk around cost increases for businesses, we might see inflation creep back up and this will slow down any expected rate decreases and I think there's a chance rates might even be slightly higher at the end of the year.

caprikid1

I am about to remortgage on a BTL and going for a 2. Held off a bit over the last few months and already seen rates come down.

Given the pricing it certainly shows that the market is expecting a fall in rates over the next 12 - 18 months.

kezzygirl

I too have the same quandary. Looking at one mortgage going up by £175 a month from end Feb and our ported mortgage rate expires end of May. Think the purse strings will be tighter, making me feel a bit sick.

Karen77

kezzygirl said:

I too have the same quandary. Looking at one mortgage going up by £175 a month from end Feb and our ported mortgage rate expires end of May. Think the purse strings will be tighter, making me feel a bit sick.

I know, I feel the same... I just can't get my head around losing an extra almost £300 a month and it's not like it's coming off the overall mortgage, it's just going to the bank! Feels like a big scam of adulthood 😭😭

Karen77

Newbie_John said:

Are there any "£999" fees as well? The 2 year one is 24x£40 = £960 more expensive over two years. Nobody knows if after that rates will be 1% or 10% 🤔

I opted for quotes without fees as the fees totalled more than the additional costs of the rates without them